Alternative Investments: Who Can Invest?

The eligibility to invest in alternative assets can vary depending on the specific investment and regulatory requirements in different jurisdictions. This blog has been written from a US perspective.

Being an Accredited Investor or a Qualified Purchaser are both levels of financial sophistication that have historically allowed individuals and entities to invest in Alternative Investments. Accredited Investors are individuals or entities who meet certain criteria set forth by the Securities and Exchange Commission (SEC). Qualified Purchasers are also individuals and entities who meet certain criteria set forth by the SEC, but the criteria are stricter than that of accredited investors.

To be an Accredited Investor, you must meet certain net worth or income thresholds. The SEC defines an Accredited Investor as someone who has a net worth of at least $1 million (not including the value of the person’s primary residence) or an individual who has earned an income of at least $200,000 each year for the past two years (or $300,000 when combined with a spouse) and has a reasonable expectation of earning the same amount in the current year. Entities such as corporations, trusts, and partnerships are also considered Accredited Investors if their net worth is greater than $5 million, or all of their equity owners are accredited.

Qualified Purchasers, on the other hand, are individuals and entities with a net worth of at least $5 million, not including the value of their primary residence. This includes individuals with a net worth of at least $5 million or a family with $5 million or more in investments through a charity, company or estate, or a trust set up for their benefit. Qualified Purchasers also include individuals or firms with discretionary control over $25 million in assets (own or others’).

For decades preceding the 2008 financial crises, only Accredited Investors or Qualified Purchasers were allowed to invest in traditional Alternative Investments such as venture capital, hedge funds, real estate funds and private equity. These investments presented high net worth (HNW) individuals and entities with the opportunity to diversify their portfolio, hedge against risk, and further their returns.

However, in recent years, the landscape of Alternative Investments has changed drastically. Thanks to a shift in regulations, innovation in technology, and lower investment minimums, Non-Accredited Investors can now invest / get exposure to financial products that directly or indirectly roll up under Alternative Investments.

The 2018 Jumpstart Our Business Startups (JOBS) Act opened the door to Non-Accredited Investors, allowing them to invest in certain private securities offerings. This act, along with other regulatory changes, has enabled more people to get exposure to Alternative Investments.

The 2018 Jumpstart Our Business Startups (JOBS) Act opened the door to non-accredited investors, allowing them to invest in private securities offerings. Along with other regulatory changes, this has enabled more people to get into alternative investments.

Advances in technology have also made it easier for individuals to access Alternative Investment products such as Cryptocurrency, Digital / Non-Fungible Tokens (NFTs), Fractionalized Alternative Assets, Crowd Funded Investments, Liquid Alternatives etc.

It’s important to note that regulations governing Alternative Investments vary across jurisdictions, and the eligibility criteria can differ accordingly. It’s crucial for investors to understand the specific rules and regulations in their respective countries or regions before investing in alternative assets. Additionally, investors should carefully assess their risk tolerance, investment objectives, and seek advice from qualified financial professionals before making any investment decisions in alternative assets.


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Disclaimer: The information provided in this blog is for general informational purposes only and should not be considered professional advice. The content is based on general industry practices and terminologies, and it may not be applicable to all situations. Please seek advice from a qualified professional or conduct further research before making any decisions based on this information. EzAlts Inc is not responsible for any inaccuracies or errors in the content. Any links or recommendations are not endorsements, and EzAlts Inc is not liable for any damages resulting from the use of this information.


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